Source The economics Times
Mumbai: Amid sharp volatility in Indian equity markets, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has indicated that while the Current Account Settlement (CAS) framework will remain unchanged, the regulator is considering potential reforms in the derivatives settlement mechanism.
His remarks came after the benchmark Sensex witnessed another turbulent trading session marked by a swing of over 1,000 points, highlighting persistent uncertainty and heightened speculative activity in the market.
Addressing concerns over market stability, the SEBI chief clarified that the existing CAS structure continues to serve its intended purpose and does not require immediate alterations. However, he acknowledged that the derivatives segment, which has seen rising participation from retail as well as institutional investors, may need a reassessment in terms of settlement cycles and risk management frameworks.
Market experts have long debated whether the current derivatives settlement system adequately reflects the rapid pace and complexity of trading in index futures and options. With increased algorithmic trading and leveraged positions, even minor global cues have been triggering sharp intraday movements, amplifying volatility.
Pandey’s comments come at a time when regulatory bodies are closely monitoring market behaviour following repeated episodes of sharp swings in the Sensex and Nifty indices. The recent 1,000-point fluctuation in the Sensex has once again raised questions about risk containment measures and the effectiveness of existing safeguards.
According to officials familiar with regulatory discussions, SEBI is examining whether changes in settlement timelines, margin requirements, or position limits could help reduce excessive speculation without hampering liquidity. Any potential reform, however, is expected to follow extensive consultation with market participants, including stock exchanges, brokers, and institutional investors.
Despite the volatility, the SEBI chairman reassured investors that India’s broader market structure remains resilient and well-regulated. He emphasized that periodic reviews are part of the regulator’s approach to ensure that the financial system evolves in line with global best practices and domestic market growth.
Analysts believe that while no immediate policy shift has been announced, even the possibility of changes in derivatives settlement could influence trading strategies in the short term. Investors are likely to watch for further clarity from SEBI in upcoming regulatory updates or consultation papers.
As markets continue to respond to both domestic and global cues, regulators appear focused on striking a balance between innovation, liquidity, and investor protection in one of the world’s fastest-growing equity markets.
